Tennessee state agencies ordered to plan for 30 percent cut in federal funds

Tennessee state agencies ordered to plan for 30 percent cut in federal funds

NASHVILLE - State agencies have been ordered to submit plans next week outlining how they will deal with up to 30 percent cuts in federal aid.

Finance Commissioner Mark Emkes said in a letter dated Thursday that because about 40 percent of Tennessee's $30.8 billion 2011-2012 budget is comprised of federal aid, bond-rating agencies have requested the information in light of deficit and debt reduction plans passed earlier this month.

"While it is not possible for the state to know now what specific program reductions will be implemented by the federal government, we must plan," Emkes said in the letter, addressed to all agency heads and budget officers.

Agencies have been asked to submit plans for how they would cut their budgets by 15 percent and 30 percent based on federal-aid reductions.

"In developing the plans, you must assume that state revenues will not be used to maintain federal programs at the current funding level," Emkes wrote. "That is, you are not to supplant federal funds with state revenues as a funding source for continuing services."

Emkes, state Treasurer David Lillard and other officials met in New York last with bond rating agencies Moody's Investor Services and Fitch in New York as the state seeks to keep the agencies from downgrading its top ratings on its debt. That came after Standard & Poor's recently downgraded U.S. government debt.

Officials are expected to go back in September.

The recently passed Budget Control Act of 2011 raised the nation's debt ceiling but calls for huge cuts over the next decade. The initial phase calls for $900 billion in savings while a 12-member group of U.S. House and Senate Republicans and Democrats are expected to hammer out another $1.5 billion in reductions by November.